Food delivery services and restaurants aiming for the unsaturated suburban markets

Skift Table suggests the suburbs are ripe for increased restaurant and food delivery activity:

Outside the urban cores, things get interesting. Earnest Research shows that in the rest of the U.S. market, it’s a head-to-head battle between DoorDash (31 percent market share) and Uber Eats (with 30 percent). In third place is Grubhub, coming in at 27 percent…

“Many suburban areas tend to have a larger number of chain restaurants than independent mom and pop restaurants, making it advantageous for Grubhub to offer takeout from these familiar chains to local residents who may not be accustomed to the idea of ordering delivery,” says Katie Norris, Senior Manager of Communications at GrubHub…

But not all restaurants need to be located on Main & Main to succeed, thanks to the ever-expanding reach of digital marketing and social media. And raising capital might also be within closer reach than once thought. “To mitigate high rents, many brands are opening in second-tier locations and that’s very attractive to investors,” says Chad Spaulding, Managing Director at the U.S.-based investment firm Capital Spring. “We spend more of our time seeking low-rent, low-investment type opportunities that provide a value to the consumer that you can count on in tougher times in the wider economy.”

Suburban locations not only fit this bill, they also solve the urban issue of oversaturation. There is simply less competition the farther afield you go. And now, you can actually go further than before. Because Uber Eats drivers and DoorDash dashers can soon be there to meet you — in 30 minutes or less.

There may be less competition and cheaper rents but there are certainly other costs such as increased driving distances to deliver food and finding ways to attract suburbanites to a physical location.

In the long run, it would be interesting to consider what it would take to raise the level of suburban food to that of major cities where awards, interest, and big name chefs seem to be much more common. Does fine dining and innovation in food require a density of restaurants, food workers, and well-heeled customers or could this all come together in some way in the suburbs? Could the suburbs of today who are often interested in developing entertainment and cultural districts really go after high-end and innovative food as a strategy to successfully compete against suburban fast food and chain restaurants?

Home value algorithms show consumers data with outliers, mortgage companies take the outliers out

A homeowner can look online to get an estimate of the value of their home but that number may not match what a lender computes:

Different AVMs are designed to deliver different types of valuations. And therein lies confusion.

Consumers don’t realize that there’s an AVM for nearly any purpose, which explains why different algorithms serve up different results, said Ann Regan, an executive product manager with real estate analytic firm CoreLogic. “The scores presented to consumers are not the same version that is being used by lenders to make decisions,” she said. “The consumer-facing AVMs are designed for consumer marketing purposes.”

For instance, more accurate models used by lenders do not include outliers — properties that sold for extremely high or low prices and that consequently would skew the averages and the comparable sales for a particular house, like yours. But models used by consumer websites, such as brokers’ sites and national listing sites, scoop in as much “sold” data as possible when concocting a valuation, because then they can claim to include all available data. That’s true, said Regan, but it’s more accurate to weed out misleading data.

AVMs used by lenders send along “confidence scores” that indicate how firm the estimate is. That is a factor typically not included alongside consumer AVMs, she added.

This is an interesting trade-off. The assumption is the consumer wants to see that all the data is accounted for, which makes it seem that the estimate is more worthwhile. More data = more accuracy. On the other hand, those that work with data know that measures of central tendency and variability can be thrown off by unusual cases, often known as outliers. If the value of a home is too high or too low, and there are many reasons why this could be the case, the rest of the data can be thrown off. If there are significant outliers, more data does not equal more accuracy.

Since this knowledge is out there (at least printed in a major newspaper), does this mean consumers will be informed of these algorithm features when they look at websites like Zillow? I imagine it could be tricky to easily explain how removing some of the housing comparison data is actually a good thing but if the long-term goal is better numeracy for the public, this could be a good addition to such websites.

Housing bubble fallout: lost jobs in land subdivision

The long-lasting consequences of the housing crisis of the late 2000s continues: an analysis of the American industries losing the most jobs by percentage includes the land subdivision sector.

9. Land subdivision

• Employment change 2008-17: -49.3%
• Employment total: 40,207
• Wage growth 2008-17: +35.5%
• Avg. annual wage: $71,744

The U.S. housing market is beginning to return to normal following the Great Recession and housing market crash. Housing starts in 2017 were similar to 2007 levels, before the crash. The land subdivision industry, which divides land into parcels for housing and other purposes, suffered as a result of the market’s struggles. As of 2017, industry employment is just about half of what it was a decade before.

This was never a large sector but a drop in jobs of nearly 50% is substantial.

Since I know little about what land subdivision requires on a daily basis, I wonder if this decrease is primarily because of a slowdown in housing starts or are there other significant changes in the industry such as new efficiencies and approaches?

American battle: weirdness vs. wealth

In a closer look at what is happening to retailers in New York City, Derek Thompson suggests two contrary forces are at work in urban America:

A war is playing out in American cities between wealth and weirdness. The former encourages the pursuit of national trends and national brands—high-end fitness studios adjoining Sweetgreen franchises—for the purpose of maximizing profit on a per-lease basis. That spirit runs counter to the desire for diversity and experimentation, which requires policies that actively promote the survival of small companies in an economy that would otherwise eat them up.

I would suggest this goes further than just big cities. One could argue this is a larger battle fought since at least the end of World War Two involving revered ideals in American culture.

On one side are the powers of standardization, efficiency, predictability, and national chains. Think the rise of McDonald’s, Walmart, and Google. These companies came to represent whole sectors of business and their actions helped lead to predictable user experiences and outcomes across different geographic contexts. They are good at efficiency, offering customers a cheap service while turning out billions in profit.

On the other side are the powers of small businesses, entrepreneurs, diversity, and American individualism. Think the quirky and interesting shopping districts that attract visitors. Many of the establishments offer unique experiences that are difficult to replicate elsewhere. Think businesses that reflect the traits of their owners. These are people trying out ideas and participating in the local community. Non-conformity and cool are still sought after.

Both of these types of businesses reflect American ideals. Many of the national chains we know today started as the more unusual business options that became wildly successful. Some owners and founders want to remain small and others want to try for everything they can get. Obtaining a good balance of these approaches is likely hard to do from a policy level.

Building a Sears mail-order home

The Chicago Tribune offers a summary of Sears mail-order homes from the first half of the twentieth century:

From the early 1900s until 1942, Sears, Roebuck and Co., more commonly known as Sears, sold thousands of mail-order kit homes, which buyers could pick from a catalog. The Barrington, for example, cost $2,606 and came with everything from trim, windows, millwork and flooring — some 30,000 pre-cut and numbered parts shipped by rail for assembly by owner or a local contractor. Housing styles were in the hundreds, floor plans customizable and prices from around $100

Ohio has the largest number of Sears kit homes, followed closely by Illinois, according to Solonickne, who started researching the topic seven years ago thanks to her daughter’s school project. Because many of the original sales records weren’t easily accessible, Solonickne decided to take on the task herself…

As of late summer, Solonickne counts 213 Sears homes in Elgin, 149 in Carlinville, 146 in Rockford and 69 in Downers Grove…

A number of companies — such as Aladdin Co. of Bay City, Mich., and Chicago-based firms Montgomery Ward and Harris Brothers — produced and sold mail-order homes. Each of these companies, including Sears, offered large luxury models (around 10 rooms) as well as two- and three-room vacation cottages, said Hunter.

Perhaps the most interesting part of this to me is the number of people who might live in such homes without knowing it. When you purchase a home, you actually do not find out much about the past of the home unless the seller goes out of their way to provide that information (and if they do, they are likely to doing so to justify a higher selling price).

It is also a bit strange to me that Sears itself would not have kept records (or those records did not survive) of to whom they sold home kits. Given the size of the order, wouldn’t Sears keep track of this information?

If Amazon is a direct descendant of Sears, we can expect Amazon to at some point sell homes or kits. Perhaps they would sell you all the materials and then offer an Amazon Expert to build it for you.

Three possible solutions to “American cities and states spend[ing] up to $90 billion in tax breaks and cash grants” to companies

After discussing why American communities spend so much money and effort to attract companies, Derek Thompson proposes four solutions:

First, Congress could pass a national law banning this sort of corporate bribery. Mark Funkhouser, a former mayor of Kansas City, Missouri, envisions the law as the domestic version of the Foreign Corrupt Practices Act, which makes it illegal for Americans to bribe foreign officials.

It’s not entirely clear whether that would pass constitutional muster. The Supreme Court hasn’t ruled decisively on whether the Commerce Clause gives Washington the authority to ban interstate bidding wars. In the 2006 Supreme Court case DaimlerChrysler Corp. v. Cuno, Ohio taxpayers sued the state after it paid the automaker DaimlerChrysler about $280 million in tax exemptions and tax credits. The Sixth Circuit Court sided with the taxpayers, striking down Ohio’s subsidy as a violation of the Commerce Clause. But the Supreme Court avoided a final judgment on the matter by finding unanimously that the plaintiffs did not have standing to bring the suit.

Second, Congress could make corporate subsidies less valuable by threatening to tax state or local incentives as a special kind of income. “Congress should institute a federal tax of 100 percent” on corporate subsidies, Jack Markell, a former governor of Delaware, wrote in The New York Times. “This would not include investments in public infrastructure, work force development or other investments that can attract employers while also providing a significant long-term benefit to taxpayers.” Taxing subsidies would hopefully force cities to change their economic-development strategies, from importing other states’ companies to building their own—through investing in research universities, building more housing, and welcoming immigrants, since foreign-born Americans have the highest rates of entrepreneurship.

Finally, the federal government could actively discourage the culture of corporate subsidies by yelling, screaming, and penny-pinching. As Meagan Day wrote in Jacobin, “The federal government could withhold funds from governors and mayors who threaten to poach jobs from other states, or who won’t disclose their incentive packages.” Washington tends to look on quietly when cash-strapped states break the bank to welcome glitzy tech firms. But an attitude change at the top could trickle down to the local level. Donald Trump, or another president, could have made a national address after the HQ2 announcement slamming Amazon for soliciting taxpayer funds in a silent auction. He could have called a summit to encourage the nation’s mayors and governors to offer the same tax subsidy for HQ2—zero dollars and zero cents. Even a tweet could suffice: “7 BILLION FOR BEZOS?? Trillion-dollar companies in America don’t need our welfare! Bad!”

Interesting options. I have argued before that this practice leads to a race to the bottom between communities. They can even pit suburbs and cities within the same region against each other.I wonder if both businesses and communities would complain. Businesses would want to get the best deal they can. Why shouldn’t they be able to compare different offers? They may go as far as to argue that the tax breaks help them be more profitable which means they can then spread more wealth to workers and investors. Communities might prefer to keep competing because it gives them a chance to entice a business that otherwise might not move there. If tax breaks became less valuable, would certain industries and kinds of firms gather in a limited number of attractive locations? Open competitions for companies gives communities a chance to get their name out there and build a brand. Furthermore, these tax break opportunities allow local officials to show that they are making a concerted effort to bring jobs to an area.

I do not see this practice stopping soon even as we see the fallout of the Amazon race. While it may take time for the federal government to step in, communities could decide to opt out from such competitions. What would happen if in a situation like the Amazon one, the major contenders refuse to pander to the corporation?

Amazon HQ#2 may be headed to a wealthy suburb

Crystal City, Virginia may be the new home of Amazon’s second headquarters site. Here are a few features of the suburban neighborhood located in Arlington:

With the Ronald Regan Washington National Airport two miles to the east, the heart of Washington D.C. five miles to the north, and a few stops on Washington’s Metro linking all three, Crystal City is in the right geographic spot for the Seattle-based company…

Today, the neighborhood, although a part of Arlington, has its own distinct downtown area. The walkable Crystal Drive is dotted with businesses, restaurants and public art, while public/private partnerships are bringing investment in parks and open space

Home prices in Crystal City might be more affordable than they are in Seattle, but that’s not saying much. The median home value in the 22202 area, a zip code Crystal City shares with neighboring Pentagon City, Aurora Highlands and Arlington Ridge, is $625,800, according to Zillow — nearly three times the U.S. median.

Might the lack of single-family homes also be attractive to Amazon?

Crystal City is dominated by one apartment building after another, most of which don’t have ground floor retail or restaurants that would create a sense of community or neighborhood vibrancy. Walk a few blocks away from the shopping mall during any evening of the week and it’s a quiet, almost desolate place. This lack of a community might have been the final piece that Amazon was looking for since it means they can come to town without much opposition.

A few quick thoughts:

  1. On one hand, it is interesting for Amazon to choose a suburban location. A sizable headquarters would be a boon for numerous communities, particularly cities that need a shot in the arm. On the other hand, this is an urban suburban location. The location is technically outside Washington D.C. yet it is a community of high-rises with little distance with the central city in the region.
  2. A location in this region contributes to the rising status of the Washington D.C. region. While other cities and regions may still be larger, this region with its collection of government, military, and business opportunities just keeps growing.
  3. It would be interesting to see how much Amazon would want to contribute to a thriving streetscape in the community. Based on several articles, it sounds like there is limited activity in this community after business hours. Does Amazon want to contribute money to trying to develop a vibrant urban neighborhood (even if it is located in a suburb)?